Granting access to your bank account

Last week PwC in Germany published a survey where the majority answered they would grant a third party access to their bank account. Exactly 2/3 said they would consider doing so and the remaining 33% stated that there is no scenario where they would do so.

Among the people who are considering granting access their willingness depends on account protection (38%), data safety and privacy (34%), added value from third party (21%), who is the third party (19%), price advantages (17%) or convenience (11%). Willingness to share credentials with third party providers is highly depending on the age. Taking only the respondents below the age of 30 in consideration, the willingness to use third party providers increases from 67% to 86%.

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Why banking needs more innovative regulation

The European Union is turning Europe into a playing field for FinTech entrepreneurs. In the post PSD2 world any accredited third party provider will be able to access the data of payment accounts whenever the owner of the account has granted the right to do so. Banking is in many ways an old fashioned industry, but the complete neglect of doing anything else with financial data that storing was surprising – to say the least. Other industries were growing vital thanks to exploiting such data sources, however, banks and other incumbents decided to not only to forego the opportunity to make use of them but also to limit access for others. Which is somehow proving, that banks know about the true value of financial data but at the same time declaring that oneself is not able to harness it, and thus, no one should. More entry barriers and protection were welcomed to make it even more complicated for outside players to enter the industry. The classical story of protectionism.

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Feeding my bank account

I have just returned from a Easter weekend trip to Dublin and unlike in Berlin, paying by card was easily possible in most of the shops, bars or restaurants. Paying with card is definitely more convenient, however, my current main reason for using card instead of cash is adding data to my bank account. While using cash, details about my spending behaviour are lost but with card payment this data is saved and accessible later on.

At the moment the pure benefit of this is that my N26 app helps me to categorise my expenses and that I’ve a nice overview of my total expenses. However, our financial data becomes more accessible thanks to PSD2 and new services are making more and more use of this data. At the moment these services are mostly focused on recurring expenses in order to optimise contracts and help the user to save money, but it’s just a matter of time until new service providers will also offer services on our full “financial footprint”.
In order for this to happen it’s important that the holder of the financial data (e.g. bank) understands the true value of the data and treats it accordingly. Until today the value of financial data has not been exploited much and keeping “the record” was a requirement but not a business purpose. A good example for this is the monthly bulk credit card payments. I’m using a credit card issued by a travel company which helps me saving credit card fees while booking a flight. However, since the monthly sum gets deducted in one sum, the data from each single booking is gone. My N26 app cannot categorise these single payments correctly and my “financial footprint” is inaccurate. This is because no party involved had an interest to move the data but just the payment itself. There was no value in forwarding the data. Personally, I believe removing barriers all around handling and transmission of financial data will be an important post-PSD2 step so service providers can actually make use of our financial footprint and not just payment transactions.

 

To be continued…

I love my data. Why does my bank not?

In a previous blog post I have already raised the question when we will finally see a “Spotify of Banking”: a provider of financial services that we don’t want to switch because the service knows us too well and thus creates positive entry barriers for other providers.

I know there are – especially in Germany – many people who don’t like the idea of sharing data. But if you take a look at different industries you can see that services that make use of consumers data is growing a lot, which is an indicator that more and more people are happy to trade their data in return for something.

But trade in for what? In my previous blog post I only talked vaguely about a banking service that makes better usage of financial data and provide a better service. I have taken a look into at some services that I am using that make use of my data and categorised them based on their benefits for me. Basically, there are two main benefits for me:

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